SoFi acquires Hong Kong's 8 Securities in first global push

April 28, 2020 06:00
8 Securities co-founder Mathias Helleu expects strong increase in the user base of the company’s mobile investing app. Following its acquisition by SoFi, 8 Securities will be rebranded as Sofi Hong Kong. Photo: HKEJ.

As its first international foothold, US-based online personal finance firm SoFi announced its acquisition of investing app 8 Securities in Hong Kong, to be rebranded as SoFi Hong Kong.

The terms of the deal were not disclosed. 8 Securities will retain its team, as it continues to run its mobile-only investment service and robo-advisory platform.

In an exclusive interview with EJ Insight, 8 Securities co-founder Mathias Helleu said the firm will continue to serve existing 8 Securities customers, as well as expand the member base, with plans to add new features from SoFi like fractional share investing, which enables investors to own part of a stock from companies and ETFs listed in the US without committing to a whole share.

Helleu also hinted at exploring the potential to add the ability to trade cryptocurrencies on the platform, as soon as the local regulatory regulations allow it.

Targeting personal investors in Hong Kong, 8 Securities saw its transaction volume and customer sign-up quadruple in the first quarter amidst coronavirus downturn, according to Helleu.

Helleu also said the firm is set to launch an aggressive marketing strategy with the support from SoFi, as it is trending to achieve US$5 billion of transaction volume for this year.

Following is an edited excerpt of the interview:

EJ Insight: With the acquisition, will the firm keep the original management and team of 8 Securities?

Helleu: We’ve been talking for a while with SoFi. SoFi is designed to serve the young investors, to make the product easy to access, low fee, mobile. When you look at their propositions, they are very similar to ours, zero commission, robo investing, brokerage, we have a lot of things in common.

Unlike many US FinTech unicorns who are only domestic, SoFi has a global ambition, and it came up that 8 securities could be a great fit.

We have international experience, as most of us came from E*Trade, we obviously have the technology, and exactly the same target customer. What we were missing, is a brand. When you are targeting retail customers, who are going to give you their money, you need a very solid brand, and being a young FinTech company is not an advantage.

SoFi is not very well known yet in Hong Kong, but it is obviously one of the biggest US FinTech unicorns, we can definitely build up trust [from customers] here.

With the acquisition, 8 Securities will be rebranded as SoFi Hong Kong, and we are all going to stay and continue to run the business.

Q: As we know, SoFi started life as a student loan financing outfit, but in recent years has been expanding aggressively into personal loans, mortgages, investing, checking and savings products, as well as free stock trading. Will SoFi Hong Kong expand its service offerings beyond mobile investing?

A: SoFi has been very innovative in its products. There are lessons and products that we can learn from SoFi. For example, SoFi was the first broker in the US to offer fraction share [investing] to young investors, which means that young investors who cannot necessarily own a very expensive stock, say, Apple or Amazon or Google, can now hold a fraction of that share, so you can buy US$50 of Apple stock, for example, at SoFi. And that's an innovation that we could look to implement in Hong Kong.

Now, in terms of student loan, I don't think there is a direct application to Hong Kong. But that's for sure in the future that we could look at the suite of products of SoFi,for example in the payment side, and see if there could be some applications for both in Hong Kong and in Asia.

Q: For the potential fractional share investing feature, does that mean customers will be able to buy and sell fractional shares in Hong Kong stocks and ETFs?

A: It will be only available for the US stocks.

Q: Other than stock investing, as we know that SoFi supports cryptocurrency trading in the US as last year it teamed up with crypto exchange Coinbase. Would it be a future development for SoFi Hong Kong?

A: Yes, that’s also one possibility or direction we are going to explore. Today crypto is not really regulated. So we are interested to see what the regulator is going to say about cryptocurrency. But definitely yes that's exactly what I meant. I think SoFi can help us explore new opportunities in terms of products you know in Hong Kong, based on what is successful in the US.

Q: Would you like to share the expansion plan of SoFi Hong Kong in the Asia region?

A: Now we are really focusing on Hong Kong, and I think the immediate opportunity would be the Greater Bay Area, based on the regulations and how the Hong Kong brokers will be able to deploy into the GBA, that would be a very interesting opportunity for us. And then, we would evaluate how to add more geography.

Q: How is the business performance of 8 Securities amid the coronavirus outbreak?

A: All our matrix, like, volume and new accounts, have grown about 400 percent quarter on quarter in the first quarter of 2020, that’s a very very strong growth. I think it has been fueled by volatility, especially in the US, but the downturn in the Hong Kong stock market also creates an opportunity for many new clients, people who have never traded, and they are way more interested to enter the market at lower valuation.

As we offer free Hong Kong and US stock trading, for the last six to seven years, our business was very balanced between US and Hong Kong stock trading, it was about 50 percent of volume for each. But now since 2020, we've seen a big increase in US stock trading, which now represents 65 to 70 percent of our volume. I think this year, we're trending to about US$5 billion of volume for the year. That’s our expectation.

Also, we have done very little marketing, but now with SoFi, we are certainly looking at being more aggressive, with a new promotion campaign. We do expect strong increase in terms of customer acquisition, especially younger investors.

With a mobile only [platform], simple, easy to use, transparent, low-price, low point of entry, adding all of that to a trusted brand, we do believe that we have a very strong formula.

Q: As we can see, in recent years, institutions in Hong Kong financial services industry are offering flexible, digital-first services to an increasingly tech-savvy generation of customers in the city, along with the eight virtual banks which are expected to digitally disrupt the sector. How will SoFi Hong Kong compete against the emerging players?

A: No, I don't think it will be a threat. I see that now the investor has a choice between, you know, these mainland Chinese competitors coming to Hong Kong, or traditional Hong Kong bank institutions. And SoFi is going to be really a different identity, as a very strong US brand. I think definitely we have room to grow, and have something to offer that these guys don't offer.

So we don't see it as a threat, we think those virtual banks are good because they're going to push the traditional banks to be more innovative and to lower the price. And ultimately, it will benefit the customers, but we also think that there is a lot to learn from best practices in the US, and the innovation that is happening there. And that's what we want to bring.

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EJ Insight writer